China presents its stance on NFTs and warns of risks
In a recent development, China’s Supreme Procuratorate has released guidelines shedding light on their perspective regarding non-fungible tokens (NFTs). NFTs, which have gained significant popularity in China following the ban on cryptocurrency trading, are now seen as digital collectibles that share the same characteristics as virtual assets. This article delves into China’s evolving attitude towards NFTs, and examines the potential risks and legal implications associated with these unique digital collectibles.
China’s prosecution raises concerns about NFTs
NFTs have emerged as a unique application of blockchain technology, enabling authentication and ownership verification of both virtual and real objects. The allure of these lies in their ability to provide proof of ownership through a digital identifier registered on the blockchain. These digital collectibles gained momentum in China as a distinct category separate from high-risk cryptocurrencies, attracting enthusiasts and investors alike.
In line with this, the Supreme People’s Procuratorate (SPP) of China recently published guidelines addressing the treatment of NFTs, signaling potential risks associated with these digital assets. The agency argues that while NFTs may enjoy popularity, they are not without financial, managerial, network security and legal risks.
SPP warns consumers about the limitations of ownership, especially in digital art, as replication and distribution is still possible despite owning NFT.
The legal landscape around NFT ownership
From a legal perspective, SPP emphasizes that consumers do not hold full ownership rights over the NFTs they acquire. Instead, they have “an exclusive right to prevent tampering with the registered ownership of the blockchain.”
While NFTs provide a sense of exclusivity, the agency cautions that consumers cannot prohibit others from accessing, copying or disseminating the underlying digital assets mapped by the NFT.
Balancing potential and risk
China’s regulatory bodies have expressed concern about the potential risks associated with NFTs, such as financial fraud, money laundering and copyright infringement. These concerns stem from the decentralized nature of blockchain technology and the limited control authorities have over the trading and circulation of NFTs.
While the agency recognizes the development potential of NFTs as an application of blockchain technology, it emphasizes the need for thorough risk assessment and vigilant prosecution to guard against potential crimes.
China’s Blockchain Ambitions
Amid the reservations surrounding cryptocurrencies and NFTs, China remains committed to harnessing the power of blockchain technology. The country recognizes the underlying potential of blockchain as it seeks to build a robust national digital infrastructure. By exploring the use of blockchain technology, China aims to strike a balance between leveraging its benefits while ensuring the necessary regulatory oversight to mitigate associated risks.
Some examples of China’s official venture into the blockchain realm are the following cases:
Final thoughts on China’s stance on NFTs
China’s Supreme Procuratorate guidelines shed light on the evolving attitude towards NFTs in the country. While NFTs have gained popularity as digital collectibles, the Asian superpower recognizes the inherent risks and challenges they pose. Therefore, the agency urges consumers to exercise caution, highlighting the limited ownership rights and the potential for financial, managerial and legal risks.
As China embraces the potential of blockchain technology, this report indicates that the country will continue to navigate the intersection of NFTs, virtual assets and the pursuit of a secure and regulated digital landscape.
Giancarlo is an economist and researcher by profession. Before joining Blockzeit’s dynamic team, he handled several crypto projects for both the public and private sectors as a project manager for a consulting firm.